PROPOSITION 4

Nov. 1, 2011 at 6:01 a.m.

Official Ballot Language

The constitutional amendment authorizing the Legislature to permit a county to issue bonds or notes to finance the development or redevelopment of an unproductive, underdeveloped, or blighted area and to pledge for repayment of the bonds or notes increases in ad valorem taxes imposed by the county on property in the area. The amendment does not provide authority for increasing ad valorem tax rates.

Explanation

Currently, the Texas Constitution allows the legislature to authorize incorporated cities and towns to use a mechanism called "tax increment financing" to finance the development or redevelopment of an unproductive, underdeveloped, or blighted area. Under this mechanism, the bonds or notes to finance the development are repaid using increases in tax revenues on the property in the area. The revenue increases come from increases in property values in the development area, not from an increased tax rate, which is not authorized. Proposition 4 would expand the authorization to include counties, so that tax increment financing could be used in unincorporated areas.

Arguments For

Proposition 4 would allow counties to work together with cities and towns to designate reinvestment zones for transportation and other redevelopment projects, allowing them to maximize resources.

Property values in a reinvestment zone may increase as a result of economic development, but no property in the zone would be taxed at a higher rate.

Arguments Against

Property taxes should not be used to fund transportation and other redevelopment projects.

Tax increment financing could create an incentive to increase property appraisals in reinvestment zones to repay the bonds and notes and thus divert funds from other pressing needs.

Because the criteria for such zones are not well-defined, influential developers could get an area designated as a reinvestment zone, and existing businesses in the zone could end up paying higher taxes for development that does not benefit them, or may even benefit their competitors.